How Working Longer Builds Security

Interesting article via the Center for Research at Boston College

As the article notes, although most surveys indicate that people plan to work until they are 65 year old, the average retirement age has been steadily declining to 62 years old.

Social Security, by the way, makes it pretty attractive to hold off for a few years before taking benefits. I went to a seminar a couple of weeks ago put on by someone from Social Security. The presenter noted that if someone waits four years before starting to take benefits - from age 66 to age 70 - the increase in benefit payments works out to be 8% per annum - not a bad return!

The math is pretty compelling to work just a few years more, if your health permits. Here's an excerpt from the article:

First, let's consider the impact of working and saving longer on your retirement income. Consider the example of a woman who is working full-time with an annual, fixed salary of $75,000 and tax-deferred savings of $150,000. Let's say that instead of retiring at 62, she decides to stay on the job for three additional years until age 65 and that annual inflation runs at a 3 percent rate. Let's also assume she saves 15 percent of her salary, or $11,250, for each of those additional working years.

Down the road, those decisions will boost her annual retirement income from investments by about 14 percent per year. At the end of those additional working years, her annual retirement income, in today's dollars, would be 43 percent higher than it would have been had she retired at age 62. If she could sock away even more of her income--25 percent-- the total increase in her income from her investments alone would be 60 percent.

How Working Longer Builds Security